Strategic

Management
Presentation

- Lavita
Dsouza

MERGERS
Why and When:
1. Companies seeking for financial performance.
2. Increased revenue and / or market share.
3. Economy of scale and Cost cutting
4. Cross- Selling
5. Geographical/product or any other diversification.
6. Replacing leadership and Synergy
7. Absorption of similar business under single merger.
8. Tax Consequences.
9. Survival

PROS OF MERGER
Network Economies
Research of development
Other Economies of scale
Avoid duplication
Regulation of Monopoly
Audience Higher market accessibility
Size
Reduction Of Competition
Mostly friendly negotiation and rarely hostile
Increase in customer satisfaction

CONS OF MERGER
Higher Prices
Less Choice
Job Losses
Diseconomies of sale
Homogenization
Lack of quality production
Dissatisfaction among shareholders
Corporate restructuring
Cultural Barriers

JOINT VENTURE
Why and When:
1. Incorporated for a single business transaction.
2. Sharing strengths.
3. Sharing and Minimizing Risk.
4. Increasing competitive advantage in market place.
5. To restrict potential competitors.
6. Reducing entry of others in given market.
7. Success of smaller projects for established

corporations.
8. Big company ventures with small companies.
9. Small firms partnering for bigger competitors.

PROS OF JOINT VENTURE

Expanding business influence and more powerful market

presence.
No transfer of ownership involved
Sufficient resources
Ability and experience
New and improved technology
Using existing market strategies and distribution channels.
Exchange of products
Access to new markets
Spreading the risk
Less cost than merger and acquisition

CONS OF JOINT VENTURE

Takes time and efforts to form the right relationship
Objectives of each partner may differ.
Imbalance of financial resources
Difference in culture
Lack of assuming responsibility of partners
Conflicts and disputes
Consideration
Taxes
Liability
Longer time to take decisions

EXPANSION
Why and When:
1. For growth of exports and domestic sales
2. Structure and efficiency
3. Obtaining financing
4. Brand recognition
5. Dominating a niche
6. Landing major contracts
7. Technological Improvements
8. Achieve economies of scale

PROS OF EXPANSION
New customers
Economies of scale
Attract and retain good employees
Financial support from lenders\
Major client contracts

CONS OF EXPANSION
Spread too thin expertise
Capital requirements
Increase of business projects and processes

ALLIANCE
Why and When:
1. Larger variety ofproducts or services.
2. Reduction in recruitment cost.
3. Good marketing and advertising budget.
4. Larger target audience
5. Exchanging endorsements and adding credibility
6. Expansion of business
7. Gaining new area of expertise
8. Strengthening relationships with key suppliers

and customers

PROS OF ALLIANCE
Strategic Objectives
New Markets
Knowledge Sharing and know how
Economies of Scale
Reduction in recruitment cost.
Gaining capabilities
Can be easily dismissed
Not necessary to move liabilities
Focussed on core competancy

CONS OF ALLIANCE
Lack of Control
Unequal Benefits
Merged Reputations
Liability
Sharing of future profits
Foreclosure of other opportunities
Creating a competitor or a potential

competitor

DIVERSIFICATION
Why and When:
1. Management motives- Social Standing
2. Benefit the firm's owners through increasing
3.
4.
5.
6.

the efficiency of the firm

To economize on transaction costs
When there is excess capacity
Brand Extension
To make use of internal capital markets

PROS OF
DIVERSIFICATION
Financial synergy
Market Share
Growth
Risk Protection

CONS OF
DIVERSIFICATION
Overextension
Lack of Expertise
Cost
Reduced Innovation

DIVESTITURE
Why and When:
1. Divest to Obtain Funds.
2. Focusing on Primary Business
3. Prevention of Monopoly
4. Availability of Other Investment Opportunities
5. Inability to Achieve Synergy or Strategic Fit
6. Bankruptcy
7. Tax Considerations and Disclaimer

PROS OF DIVESTITURE
Strategic Focus
Transparency and Value
Raise Cash or Reduce Debt
Stick to Your Core Competency
Antitrust

CONS OF DIVESTITURE
Contractual
Costs

Thank you